Correlation Between First and Pressure Technologies

Can any of the company-specific risk be diversified away by investing in both First and Pressure Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First and Pressure Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Class Metals and Pressure Technologies Plc, you can compare the effects of market volatilities on First and Pressure Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First with a short position of Pressure Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and Pressure Technologies.

Diversification Opportunities for First and Pressure Technologies

-0.38

Correlation Coefficient

First  Pressure Technologies

Very good diversification

The 3 months correlation between First and Pressure is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Pressure Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pressure Technologies Plc and First is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Class Metals are associated (or correlated) with Pressure Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pressure Technologies Plc has no effect on the direction of First i.e., First and Pressure Technologies go up and down completely randomly.

Pair Corralation between First and Pressure Technologies

Assuming the 90 days trading horizon First Class Metals is expected to generate 1.99 times more return on investment than Pressure Technologies. However, First is 1.99 times more volatile than Pressure Technologies Plc. It trades about 0.02 of its potential returns per unit of risk. Pressure Technologies Plc is currently generating about -0.2 per unit of risk. If you would invest  180.00  in First Class Metals on October 25, 2024 and sell it today you would earn a total of  0.00  from holding First Class Metals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Class Metals  vs.  Pressure Technologies Plc

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Class Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pressure Technologies Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pressure Technologies Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pressure Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First and Pressure Technologies

The main advantage of trading using opposite First and Pressure Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First position performs unexpectedly, Pressure Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pressure Technologies will offset losses from the drop in Pressure Technologies' long position.

The idea behind First Class Metals and Pressure Technologies Plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.